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Partial credit

Written By: - Date published: 11:36 am, December 19th, 2008 - 29 comments
Categories: economy, national/act government - Tags:

Yay, more infrastructure spending during a recession. That’s the right thing to do – stimulate the economy and spend while the price of construction is lower.

But why, oh why, cancel spending on rail and housing insulation and put the money into roads, instead?

The only reason I can think of is that National/ACT doesn’t like KiwiRail and insulation because they were the Left’s iniatives. There is certainly no pragmatic reason to drop them. From both an environmental and economic stand-point investing in rail and warmer homes are the best options. The payoff from insulation alone is $4 for every dollar invested. We need more roads in the age of peak oil like we need a hole in the head.

Unfortunately, we’re still not seeing much of this much-vaunted Key pragmatism (in fact, we’re not seeing much of Key at all). In its place, we’re seeing typical tory thinking as we go from clean and green to grey and grubby.

29 comments on “Partial credit ”

  1. sweetd 1

    Why was insulation promised by Cullen then no money allocated by him for it?

  2. George Darroch 2

    To be fair to NACT, the last Government was pretty keen on building roads, and wouldn’t provide the cost/benefit calculations where asked.

    Still pretty poor though. Especially when, as you note, there are other things to be spending money on. Those two aren’t the only ones though, there is a whole list of money saving investments that the Government could participate in if it wanted.

  3. Graeme 3

    Yeah – I don’t know their details, but the argument from National seems to have been that there wasn’t actually any money planned for spending on rail nd insulation. There was $X, Labour had plans to spend $Y of it on one thing, and $Z of it on something else, and all of that $X was planned to be spent. And then they said they’d spend $A on something $B on something else, but there was never any money to actually pay for it.

    That’s the argument anyway; I’m very interested in your take on it.

    • Graeme. It doesn’t matter if there was previously budgeted money or not. The spending on rail and house insulation was going to come out of the same captial spending alowance that National/ACT is now planning on spending on roads. No matter the technicialities there is a choice to be made over where to spend the money – rail and home insulation are much better options than roads.

  4. Peter Wilson 4

    Yep, if we want to address both this current crisis and prepare for the future on the far side of the forbidding looking Hubberts Peak there aren’t many better options than to invest in rail. Investment in rail would revitalise regional economies, increase both the speed and the efficiency in which stuff travels around the country, as well as leaving a decent bit of infrastructure in place for the future.

    As the availability of oil declines (just wait for the huge price spike in the next year or so when the world economy restarts) the ability for us to rebuild a rail system will start to disappear. Although, we did build most of our rail system a long time before oil became readily available, but that relied on a large amount of human labour.

    Much easier if we do it now before we need it, but since when have tories ever invested in the long term (except if its the long term lining of their pockets).

  5. infused 5

    I really see no point building rail in New Zealand. I’ve actually been doing a lot of research on electric powered cars over the last few weeks and man, they are such a good option now. The only thing holding them back is the price of the batteries.

    We are always going to need roads. New Zealand has been ‘designed’ in such a way that we will always need a form of transport like this.

    And Peter, you’re not going to see the world economy restart next year. We haven’t even hit the crisis yet. Come back to this post in 6-12 months.

  6. sweetd 6

    Infused

    latest episode of Top Gear (Series 12, episode 6 or 7, not shown in NZ yet) James May drives the new Honda hydrogen powered car, which looks and drives just like a normal car, no need for those pesky batteries. Just fill the baby up with hydrogen and she’s good for 300km’s. The Tesla is very good electric sports car, but as they (again Top Gear) show it runs out of juice after 50 kms of hard driving, and needs 16 hours to charge up again. Apparently (as they say on the show) hydrogen isn’t too tricky to get and is very abundant. Peak oil, humbug. Greenies will need to bleat about something else as science has once again saved the day.

  7. jagilby 7

    “no pragmatic reason to drop them.”

    I don’t see any pragmatic reason why any purchaser would pay a 100% control premium for any asset, that’s just me though. In the business of buying and selling assets there is a recognised term that you can apportion to such indulgence though – that term is being “irrational buyer”.

    You are right though – there is no pragmatic reason to drop Kiwi Rail now… doing so would mean realising that “irrational buyer premium” as a loss…. well some of it anyway, most of it was realised almost immediately through impairment, unsurprisingly.

  8. the sprout 8

    “why, cancel spending on rail and housing insulation and put the money into roads”

    umm, could it be the Roading Lobby has a lot of friends in National?

  9. insider 9

    Your $4 figure for insulation seems questionable. Where did you get that? [from this widely-reported study http://www.thestandard.org.nz/the-housing-question/ SP] Even Ralph Chapman says it is only 1.73 and he has a keen interest in promoting this area.

    SweetD

    Hydrogen is very tricky and very expensive. It is hard and costly to free it into a state able to be burnt for energy – the major sources being hydrocarbons or water. It is really hard to store because to get the density needed for a fuel it needs to be highly compressed. That’s why it is still experimental.

  10. Peter Wilson 10

    Infused – interesting comments:

    You’re right about the global economy – my prediction of a rebound within a year is probably a little optimistic. I’ll come back to my post within two years! The basic point remains though, without new investment oil production declines by 6-8% per year (IEA assessments). So, with the credit crunch all sorts of oil projects have been placed on hold, and given the lag time that there would have been before production came from the new projects, this means a serious price spike when things sputter into life again.

    In terms of your comments about rail and electric vehicles there’s two points I need to make.

    1) Rail is the single most efficient (physics, not economics) way of moving stuff long distance on land. Electric vehicles might work for moving people short to medium distances, but using them for freight is never going to be a goer, due to the simply prohibitive cost of the batteries.

    2) When considering the energy economics of hybrid and electric vehicles you really need to take into account the energy costs of producing the things. A hybrid or electric car has a huge energy cost of construction, due to its complexity and the amount of rare elements used in the batteries. In a world with increasingly scarce energy, there is simple no way you could replace a car fleet with these hybrids or electric vehicles (2.5 million cars in New Zealand?).

    By the same token hydrogen is not a source of energy, it’s a way of storing or transferring energy. Creating hydrogen requires an external energy source, which in most countries is electricity from burning fossil fuels. Hardly a sustainable option then. NZs a little better, but we hardly have the capacity in our power system to meet vehicle charging demand.

    Finally, NZ as a country was designed a long time before roads. It was rail and coastal shipping which connected the place and set the pattern of settlement and development. Roads came along later of course, once we had sufficient energy to build them. I would assume that as energy depletes, we’ll go back to rail.

  11. Edosan 11

    Cancel spending on rail? But national love rail! See…

    http://nathanguy.co.nz/index.php

  12. roger nome 12

    Insider – who cares? It’s an initiative that will save the government money, and better many thousands of peoples’ lives – so why the hell are the Tories choosing to scrap it? It’s madness.

    In general, we need to adopt a “fence at the top of the cliff” approach to social issues – with the 1980s and 1990s came an extremist “ambulance at the bottom of the cliff” mentality, that was purely ideological, neoliberal and anti-pragmatic – and Clark’s government didn’t do nearly enough to change that.

    If we only ditched the punitive “beat up the poor” mentality, we could save billions of dollars and have a far healthier, happier society. Take a look at this recent report for instance:

    http://www.stuff.co.nz/4795187a6160.html

  13. infused 13

    sweetd: Actually, new cars will go 120km while bring thrashed. The cars are the new GM ones with nickle batteries. NiHM. It went 300km while being driven normally over hills and what not. I’ll try locate the article.

    50km will be lead based.

    Hydrogen takes 3x as much energy to make than petrol… so it’s not really better.

    Peter Wilson: I fully agree about freight. My comments were based on passenger rail. I don’t agree with that at all.

  14. djp 14

    pile more malinvestment upon a correcting market.. what a novel idea

  15. Anita 15

    infused,

    Why don’t you agree with passenger rail? At the moment I’m working a couple of days a week in Palmerston North but I live in Wellington. PN-Wgtn is a great passenger rail line; it’s fast, environmentally much better than cars, buses or planes, and much much safer.

  16. sweeetdisorder 16

    Infused

    GM ones you say? The same company being bailed out at the mo. I hope some engineer has the good thought to keep the plans in his back pocket so they are not lost to time when the factories are shut.

    The program (top gear yet again….) went on to say about hydrogen that if you put the same amount of resources that you do into getting oil out of the ground into producing hydrogen, then it would be about the same price and difficulty. I am only going off what the program said, I have no great knowledge in this area so I bow to anyone who professes any skills at getting cheap hydrogen to the pumps.

    BTW, has a great bit with Boris Johnson (Mayor of London) as the guest in the reasonably priced car. I love the guy but it looks like he is on coke or something.

  17. Con 17

    Trains are socialist technology; that’s why the Nats don’t like them. Where’s the competition? They’ve tried organising competition and failed miserably. The only way to run rail in NZ is as a state-owned monopoly. From the Nats’ point of view, then, better to just run it into the ground.

  18. Macro 18

    We were discussing this matter the other day at smoko. The compactor driver wondered why the govt were fixated by motorways? – Where are the jobs for us? It takes only a few people to build a motor-way and heaps of money in materials. He’s right. We still need more houses – NOT the expensive housing developments the country has been building for the past 10 years but good quality, energy efficient, low cost housing. Yes it is possible. We are working on such a development in Mangere at the moment. (small and infill tho) There is much more work generated in sub division development,- earthworks, civil, drainage, telecom, power, builders etc. Our major cities septic and stormwater systems are also in need of upgrading. Not very sexy. But that is where the work is.

  19. Joshua 19

    What rail projects suffer? Electrification of Auckland’s system? The Manukau rail spur? Surely not the already built Onehunga line.

    The CBD rail loop tunnel looks like the obvious casualty, which is annoying as basically Auckland’s rail system is going to be stuffed in about 5-10 years time without it.

  20. Swampy 20

    The investment proposed in Kiwirail looks similar to the many roading projects into which money has already been funneled in vast quantities. The only proven factotum in both cases was that the State owned the assets. Labour being more than happy to spend up large on assets they own to pump the economy, not necessarily because it is good or necessary. But it follows that large scale spending in these areas will result in rising prices and costs, a form of inflation. Much of the policy around Kiwirail is ideological anyway.

  21. Angus 21

    “In its place, we’re seeing typical tory thinking as we go from clean and green to grey and grubby.”

    I know. And apparently, some pinkos are so impoverished that then need to steal wine for Christmas !

  22. RedLogix 22

    Angus,

    Bad idea to blog with a hangover, especially if you didn’t get laid last night. Your coming across as grumpy and spiteful.

  23. vto 23

    Well I suspect the National/Maori govt are probably heading in the right direction. After all roads will be in increasing demand as the decades steadily tumble by. As it has always been. Which is of course a different issue to the often muddled similar issue of fossil fuel burning, which is what powers most road use of course.

    I see, when I look into my plastic ball, a future where roads (or rather, corridors along which people and things move, whatever form that takes) will be more chokka than ever and driven on by vehicles which run on non-fossil fuels.

    It would be unwise to bet against this happenning. It would be betting against the history of human advancement. Hence, upgrading and maintaining those corridors is important.

    Go National / Maori !!

    p.s. don’t you think this govt and its approach to most things so far makes the old clark/cullen govt look old, tired, out of touch and angry/spiteful?

  24. infused 24

    Anita: I don’t mind the current passenger rail, it’s building new rail for passengers.

    sweeetdisorder: Yes, they also had this technology in 2001. It just needs to be pushed and forced by government imo. Car companies are going to mass produce this until they need to.

  25. Ianmac 25

    State owned railways. Is not that the same as State owned roads? Both need heaps of money to make them go.

  26. Anita 26

    infused,

    I don’t mind the current passenger rail, it’s building new rail for passengers.

    So can I assume you’re ok with
    1) replacing aging rolling stock so that existing passenger services can continue;
    2) purchasing additional rolling stock to cope with additional passenger numbers on existing routes; and
    3) maintaining track and other assets so that passenger services can continue?

  27. infused 27

    Anita: Yes.

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